The FOMC will release its latest rate decision at 1800 GMT today, with unanimous expectations for a hike by 25bps to 0.75-1.00%, while the Fed are not likely to signal a steeper path in the immediate term. Yellen’s press conference will be in focus with participants watching for any comments in relation to the balance sheet. A hawkish view from Yellen could be along the lines of ‘shrinking the balance sheet may be considered later this year’ and dovish ‘will not be under consideration until next year’. In terms of the market reaction to the decision, given a hike is 93% priced in according to CME FedWatch, participants will be attempting to determine just how much of a ‘bullish hike’ this is. The Fed is expected to repeat its commitment to ‘gradual rate hikes’. As such, the longer-term Fed Fund Rate projections will be under intense scrutiny. If it is held at 3% this could be viewed as dovish, conversely if raised above 3% this could be seen as a bullish hike. I am currently watching USD/JPY (daily chart above). We are testing a key weekly level that we have been unable to close above, and we have seen 2 spinning tops and a hanging man form which suggests a lot of indecision going into this Fed decision. So, I’m looking for a bearish hike which should provide me a short opportunity with great risk/reward
